Northwest move attracts Congressional attention

7 March 2001

Northwest’s elimination of commissions for online travel agencies has raised a few Congressional eyebrows.
Congressmen Bill Lipinski (D-Ill) and Rick Boucher (D-Va) sent a letter to Attorney General John Ashcroft and Secretary of Transportation Norman Mineta saying the airlines` actions following Northwest’s move should be closely watched for possible antitrust violations.
“For several years, airlines have methodically reduced commissions paid to independent distributors of airline tickets,” Lipinski said. “This is obviously an attempt to weaken and eventually eliminate independent third-party distributors, especially Internet distributors which consistently and effectively offer consumers access to the lowest fares on all carriers.”
He said that even though price collusion is prohibited by law, “the major airlines have routinely followed in lockstep when a ‘competitor’ has changed fares, increased service fees or reduced commissions.” He added that if other airlines follow Northwest’s move, both airline competition and Internet commerce will be harmed.
In the letter, the two Congressmen noted that Northwest and three other major airlines were behind Orbitz, the airline Web site that was created to take on Travelocity.com and Expedia. They said that because of concern that the venture not allow major carriers to collude on pricing, Congress, the DOT and the Dept. of Justice all initiated investigations into Orbitz.
“For Northwest to announce—just weeks before Orbitz’s launch—that it is eliminating commissions to its most efficient third-party distributors is powerful evidence of a predatory scheme to eliminate a major source of revenue for independent Internet agencies,” the letter said.
The letter then outlined what it called a “signaling” campaign prior to the announcement by Northwest executives in interviews and speeches.——-